Whatever Neil Woodford’s record, there’s no guarantee his new fund will perform

I can’t take much more of Neil Woodford. He’s been promoting his new fund – the Woodford Equity Income Fund – absolutely relentlessly over the last few weeks. That has meant lots of press releases offering his comments on all things pharma related.

But it has also meant a torrent of press releases from every wealth management firm and stock broker he has stopped in to see on his road show around the UK.

There are currently 30 Woodford-themed emails in my inbox and that’s not for want of deletions. So here’s what I know.

I know that Hargreaves Lansdown has secured the lowest fee on the new fund for Vantage investors on their platform (0.6% vs 0.65/75% elsewhere) – something that goes a small way to offsetting the 0.45% platform fee they put on top.

I know that he thinks the pound is overvalued. I know that he’d soon like to launch a fund that invests only in unquoted companies. I know that he is keen to make sure that he keeps costs for investors low and that the management fee he quotes includes more costs than most others do.

I know that he isn’t convinced by the strength of the UK recovery and thinks rates will be lower for even longer; that he thinks the next five years will be “challenging”; that tobacco and pharma will be key themes in his new fund, but that he will be taking high conviction holdings in smaller firms as well as large cap sectors – just as he did at Invesco; that he hates most banks, but he likes HSBC; that he is targeting an income yield for the fund of around 4%; that he thinks he can get “high single digit” returns from the fund regardless of the environment; and that he believes that his “passion and energy have never been stronger” (or so he told Whitehouse Securities anyway).

I also know that he has really got the hang of this PR stuff (check out his video). But here’s what I don’t know – how his fund will perform over the next five, ten, 15 or even 20 years. Much of the PR would have you think that outperformance is a given. But it isn’t.

Defenders will say that Woodford has proved himself over and over again – avoiding the tech bubble and the banking meltdown and picking up on undervalued sectors time after time.

Nonetheless, as Fundexpert.co.uk point out, while over the last ten years Woodford’s Invesco Perpetual Income Fund (which he intends to more or less replicate so as to give investors “continuity”) has been a top performer, over the last five years it is placed only 33rd.

Widen the comparision to include growth funds (which seems reasonable given the amount of the fund taken up by smaller companies) and over 10 years, the fund comes in 17th. Over five years, it comes in 123rd.

As Fundexpert says, “ouch”. All good managers have periods of underperformance and bad luck (look no further than Anthony Bolton in China) and Woodford may soon be back on form.

But before you pile in on the back of this tsunami of publicity, it is worth remembering that you can’t buy past performance – only the hope of future performance.